Morning Report: China stops supporting its stock market bubble 8/31/15

Stocks are lower this morning on overseas weakness. Bonds and MBS are up. Slow news day.

China has given up on using state funds to support its stock market. The government has spent about $200 billion trying to support the stock market.

The highlight of the week will be the jobs report on Friday. This will be the last jobs report ahead of the September FOMC meeting. After last week’s market sell-off, the Fed Fund futures contracts took their assessment of a Sep hike from around 50% to about 30%.

Aside from the jobs report, we have some important economic data this week with the ISM surveys and construction spending. That said, the jobs report will be the big event.

The ISM Milwaukee Index came in at 47.67, a bit lower than expectations.

The Chicago Purchasing Manager’s index was almost flat at 54.4.

Stanley Fischer made some hawkish comments in Jackson Hole on Friday, which is what stopped the rally in stocks.

I had a long interview with Louis Amaya on his Capital Markets Today show. You can access it here. I discuss the economy, real estate, the Fed and China. The interview starts at the 3 minute mark.

23 Responses

  1. “China has given up on using state funds to support its stock market. The government has spent about $200 billion trying to support the stock market.”

    What, that didn’t work?

    Well, color me shocked. Shocked, I tell you.

    It’s the Frist day of the week! Happy bottom-of-the-hump day!

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  2. Greg has an interesting column up about what a potential Libertarian SCOTUS justice might be interested in overturning.

    What’s really refreshing about all this is that proponents of a Lochner revival are quite open about their grand project of invalidating much of the contemporary regulatory state. At least you know where libertarians stand. Republican politicians who perhaps share the view that major 20th century progressive achievements — which are now pillars of American life — should be rolled back in the name of economic liberty are sometimes politically constrained from admitting it. Senator Paul, for instance, had to backtrack after remarks surfaced in which he seemed to suggest that the Civil Rights Act infringed on private property rights. And it’s not unreasonable to speculate that Paul Ryan and some of the GOP politicians looking to undermine the Medicare coverage guarantee (in the name of “strengthening” its finances) might also have fundamental ideological objections to the whole program, which, after all, was dismissed as socialism during the battle over its creation in the 1960s.

    And so, I’m all for the Lochner litmus test that George Will has proposed. For that matter, I’m genuinely curious to know where Rand Paul and some of the other more conservative Republican presidential candidates are on Helvering v. Davis, which upheld Social Security on the grounds that Congress may spend for the general welfare. I’m not a close follower of libertarian legal analysis, but some have argued for a more constrained spending power, and I assume some on the right still think the Helvering decision upholding Social Security was deeply questionable. How about Knowlton v. Moore and Brushaber v. Union Pacific, in which the Court upheld the Constitutionality of progressive taxation? I wouldn’t be at all surprised to learn that some still agree with those who argued at the turn of the (last) century that progressive taxation is an unconstitutional violation of the Uniformity Clause.

    So where do the presidential candidates think Supreme Court nominees should stand on all of these? Let’s get this all debated out in the open.

    What say you here?

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    • It is somewhat interesting that Greg implicitly admits that the progressive project owes its successes to SCOTUS and not the constitution. Also notable, he thinks the “contemporary regulatory state” is one of the “pillars of American life.”

      Who would have thunk it…The two most anti-democratic institutions in our system, SCOTUS and the regulatory bureaucracy, end up being championed by progressives.

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  3. One will never, ever be appointed. There will never be a Senate majority large enough to overcome a filibuster. As far as I’ve been able to discern, Libertarians and Republicans are mortal enemies. It’s like speculating what government program(s) a Republican President and Congress would eliminate, it’s what progressives do when they’re bored and need blog content, tell scary stories.

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  4. It’s almost like the two actions are related.

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  5. @Michigoose: “What say you here?”

    I say that it’s a lot of work to post three or four whole articles every day (not kidding about that). But you will often post thought-experiments that have no basis in the real world.

    A libertarian justice will not be appointed. Only a very stupid libertarian judge would accept the nomination, and thus be destroyed by the confirmation process.

    More to the point, some of the things Greg argues about the potential for the fed to roll back state minimum wage laws would stick in the craw of the state’s right crowd, and such a selection might well get it from both sides. And such a nominee would be grilled on Social Security, and would either have to backtrack on anything they ever said against the program, or acknowledge—either way, senators on both side of the aisle would find anyone who might pass an unfavorable ruling on a program beloved on the most consistent voters in the country toxic, and would not confirm.

    A Jeb! or Scott Walker or Ted Cruz appointee that actually got confirmed would be a lot more likely to be John Roberts than Clarence Thomas or Ayn Rand. Despite the clear rightward shift of the Republican party, I don’t think we could get another Clarence Thomas on the court in this day and age.

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    • KW:

      Despite the clear rightward shift of the Republican party…

      Huh?

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      • Scott, in the time frame since Ike, has the R Party shifted left, right, or stayed the course?

        Please explain your answer.

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        • Mark:

          Scott, in the time frame since Ike, has the R Party shifted left, right, or stayed the course?

          We’ve been through this before, and I even wrote a post about the topic.

          I think it varies based on individual issues, and in some ways it is difficult to compare because the relevant issues have changed dramatically (eg anti-communism), but on the whole I think that the party has clearly shifted to the left.

          Certainly it has shifted left with regard to the welfare state. The R party has become much more amenable to social welfare spending than it was back then. For example when Medicaid was passed in 1965, 50% of R’s in the House and 53% of R’s in the Senate voted against it. There is no way a majority of the party would vote to eliminate that program today. Indeed, it has voted to expand it (see Bush’s expansion in 2003). The percent of the budget spent on the welfare state is 400% higher today than in 1950, and continues to grow every year with the complete acquiescence of both GOP congresses and GOP presidents.

          The party has also moved left with regard to constitutional interpretation. In 1964 Republican opposition to the 1964 Civil Rights Act, led by Barry Goldwater, was based on a principled belief that the constitution does not authorize the federal government to impose association regulations on so-called “public accommodations”. (Opposition to the bill deriving from racist sentiments came primarily from southern Democrats, not the R party.) Now the R party has fully dispensed with the principle of free association with regard to public accommodations, and fully accepted, if not actually embraced, the Fed’s authority to regulate who such “public accommodations” can or must do business with.

          Ike never tried to pass any kind of government health care program. That was a Truman dream that had to wait for another D, Johnson, to be realized. But the Republican presidential nominee in 2012, Mitt Romney, had himself already passed a government health care program as Governor of Massachusetts before he even got nominated.

          The growth in the federal regulatory state since 1950, a good indication of the degree of government interference in the private economy, has been massive, and continues to grow even under both GOP congresses and presidents, hardly an indication of a rightward shift away from leftism from what existed in the 1950s.

          I am sure you can find an issue or two on which the R’s will have appeared to have moved to the right since the 1950’s. But taken as a whole, I think it is obvious that the progressive project has succeeded in moving the nation to the left, and that the R’s have shifted that way as well, if for no other reason than to maintain their electoral prospects.

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    • When we lawyers talk about libertarian judges we generally mean the judges think like Volokh and Somin. Some are very highly regarded – especially Jerry Smith, on the 5th Circuit. Jerry was a RWR appointee who is near 70 now, or he would be a SCOTUS likely choice for an R POTUS.

      Some of these judges do have real doubts about the constitutionality of the FDR expansion of government and the breadth of the Commerce Clause. But so does Alito.

      Thus I agree that the most libertarian appointees would look like Alito or like Jerome Smith, and would not be referencing Ayn Rand in their opinions.

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      • Mark:

        Some of these judges do have real doubts about the constitutionality of the FDR expansion of government and the breadth of the Commerce Clause.

        It boggles my mind that any judge who takes his oath seriously doesn’t harbor those doubts.

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  6. @mcwing: “It’s almost like the two actions are related.”

    Heh. The problem there is, the last thing Wal-Mart needs to be doing is cutting hours. Their stores are already bad about managing inventory and keeping the aisles clean.

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  7. Thanks for your thoughts–in some ways, I think liberals would be more open to a Libertarian appointee than a conservative one. But that may just be my inner Libertarian that NoVA claims I have fighting to come out.

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    • Mich:

      in some ways, I think liberals would be more open to a Libertarian appointee than a conservative one.

      Unlikely. Roe/Casey are akin to sacred texts for liberals, and any libertarian judge would represent too much of a danger to those sad excuses for constitutional interpretation.

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  8. EPA, Reagan Amnesty, NCLB, Medicare Part D…yup, leftward Ho!

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    • leftward Ho!

      Good reply. Scott, you are off the hook, so to speak. EDIT: Thanx to you too, Scott.

      George, which of those programs meet with R approval today? Your point is well taken, and most of my R colleagues agreed with those R moves when they occurred, but just last night one of them said to me he hoped Kasich was still in when we get to the TX primary. That doesn’t seem to be where the Rs are now.

      I haven’t decided which primary I am going to vote in. It depends on where the action is, I guess. I always vote for the one I think is the best candidate, never to screw the “opposition”, as I feel no party loyalty.

      I do feel loyalty to the University of Texas. UT will lose to ND Saturday night, 35-24. You read it here first. In a rebuilding year for UT this game will be seen in the rear view mirror as one of molding and forming a young team. Both OTs and the MLB for UT are true freshmen, a bad sign for early season games.

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  9. Brian Buetler at the New Republic identifies the Volokh Conspiracy as the Ground Zero of the campaign to re-legitimize the Lochner decision.

    These Lochner revivalist professors have established beachheads at law schools across the country. In 2002, UCLA law professor Eugene Volokh founded a blog, The Volokh Conspiracy, as a hub for libertarian ideas, including Lochner revisionism. Today, it has become the most prominent academic legal blog in the country and now publishes under the auspices of The Washington Post. It boasts nearly two dozen contributing professors and mainlines detailed and informed libertarian legal arguments to thousands of the nation’s top lawyers, law students, clerks, judges, and opinion-makers every day.

    The contributors to The Volokh Conspiracy teach at the University of Minnesota, Northwestern, Emory, Duke, and elsewhere. Several hold positions at George Mason University’s law school, which is famous for its conservative faculty and, in 36 short years, has rocketed to prominence as one of the 50 best law schools in the country. In 2011, GMU law professor and Volokh Conspiracy contributor David Bernstein published a book titled Rehabilitating Lochner, and that’s exactly what he, Barnett, and their contemporaries have been attempting to do.

    George Mason in particular is a hothouse for conservative political scientists and economists. I may not agree with Tyler Cowen’s philosophy but he has good taste in ethnic food.

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  10. Of course the left is trying to figure out how to impeach Clarence Thomas. Can’t have an AA justice who doesn’t have the right ideology.

    http://www.politico.com/story/2015/08/hillary-thomas-213205

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  11. Knew it, lefty ghost stories.

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  12. the left is trying to figure out how to impeach Clarence Thomas.

    Anita Hill is water under the bridge. Thomas should be recusing himself from more cases considering his wife is a Tea Party activist.

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  13. I guess lying about sex is no longer acceptable.

    We all *know* AA’s are hypersexualized.

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  14. As far as I can tell, all of them. The R party does not believe in the principles they espouse. Name one program the R’s eliminated when they were in a position to do so?

    Like

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